On June 25, 2014, the Supreme Court issued a highly anticipated decision involving the latest clash of technology and copyright that marks a significant victory for television broadcasters. In American Broadcasting Companies v. Aereo, Inc., No. 13-461 (June 25, 2014) (Aereo), the Supreme Court ruled 6-3 to reverse the Second Circuit Court of Appeals and find that the controversial startup company Aereo violated United States copyright laws by streaming network television content to subscribers without paying retransmission fees to the copyright holders.

The Aereo Decision

Aereo is a streaming service that launched in New York City in February 2012 and has since expanded to approximately a dozen cities. Aereo uses special high-definition antennas to capture free, over-the-air television signals and then stream the content to subscribers who pay a small monthly fee. When a subscriber selects a show for viewing, Aereo’s system creates a “personal copy” of the show and transmits the saved copy over the Internet, thus allowing subscribers to watch and record programs on their computers, mobile devices and televisions. Aereo specifically attempted to circumvent the Copyright Act by creating a system in which each subscriber is assigned a separate antenna such that each transmission sends a different copy of the selected program to the requesting subscriber. In this way, Aereo sought to avoid falling within the scope of the Copyright Act’s “public performance” clause by transmitting what it believed to be private performances to each individual subscriber. Aereo relied on this nuanced technological distinction to distinguish itself from cable companies who must pay retransmission fees.

In Aereo, broadcasters, including Fox, ABC, NBC and CBS, sued Aereo claiming that the company’s unauthorized retransmission of their copyrighted television programming violated their statutory right to license the “public performance” of those works. On April 1, 2013, the Second Circuit denied the broadcasters’ request for a preliminary injunction and held that Aereo did not infringe upon their public performance rights because Aereo’s transmissions were “private performances.” The Second Circuit analogized Aereo’s technology to a rooftop antenna and found that because Aereo operated by sending a private transmission to a single subscriber each time a program is streamed, it was not a “public” performance.

On Wednesday, in a majority decision authored by Justice Breyer, the Supreme Court reversed the Second Circuit’s ruling and rejected each of Aereo’s arguments. Turning first to Aereo’s contention that it is merely an equipment provider, the Supreme Court held that “Aereo’s activities are substantially similar to those of the CATV [community antenna television] companies” that Congress specifically amended the Copyright Act to reach. Aereo also failed to persuade the Court that its services constitute “private performances” because each transmission is sent to a single subscriber through the subscriber’s individual antenna. The Court held that “these behind-the-scenes technological differences do not distinguish Aereo’s system from cable companies, which do perform publicly.” Having concluded that Aereo “performs” copyrighted works “publicly” within the meaning of the Copyright Act, the Court reversed the Second Circuit’s decision and remanded the case to the lower court.

Justice Scalia authored a dissenting opinion that was joined by Justice Thomas and Justice Alito. While the dissent expressed distaste for Aereo’s business model, Justice Scalia stated that the majority opinion distorted the Copyright Act in order to prohibit Aereo’s activities. The dissent further held that Aereo’s services did not constitute copyright infringement, but rather, identified a “loophole” in the law that fell outside the Court’s purview and should be addressed by Congress.

The Effect of Aereo

Aereo has been closely watched by many technology and media groups who feared that a decision against Aereo could stifle cloud-based services that remotely store personal content on the Internet via servers from companies such as Google, Microsoft, Dropbox and Box. The Court recognized these concerns by stressing that its ruling against Aereo is limited to the specific facts of this case and should not discourage the emergence or use of new technologies. In the dissenting opinion, however, Justice Scalia expressed doubt as to the Court’s ability to deliver on this promise.

While Aereo’s impact is far from clear, this case will likely have implications for the way content is delivered online. As for companies using technologies that operate like cable systems, one thing is clear: to adhere to copyright law, they must pay for the copyrighted programming they transmit. Moreover, the Court’s decision demonstrates that even if a company creates a business model to avoid being subject to the Copyright Act, this may not be enough to escape liability. Instead, courts may examine the company’s intent, as well as how the technology appears to the community at large, rather than analyzing the specific “behind-the-scenes” technology.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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